ASSA ABLOY’s $4.3 billion bid to acquire Spectrum Brands’ Hardware and Home Improvement (HHI) division, announced in September 2021, has drawn scrutiny from the U.S. Department of Justice over competition concerns.
On Thursday, the DOJ’s Anti-Trust Division sued Sweden-based ASSA ABLOY to stop the sale, contending that Spectrum Brands is ASSA ABLOY’s largest competitor in supplying the $2.4 billion residential door hardware industry in the U.S.
The HHI portfolio of products includes patented SmartKey technology and electronic, smart and biometric locks, among other household items. The division’s main brands include Kwikset, Baldwin, Weiser, Pfister and National Hardware.
ASSA ABLOY sells locks under brand names including Yale, August and Medeco. When the acquisition was first announced, ASSA ABLOY said the merger would advance its strategy to add complementary products to its core business while accelerating its transformation from mechanical locks to digital solutions.
In the U.S. District Court for the District of Columbia filing, the DOJ describes ASSA ABLOY and Spectrum Brands as “close head-to-head competitors whose rivalry has benefitted consumers and who are part of a trio that today dominates the concentrated U.S. residential door hardware industry.”
The civil lawsuit alleges that ASSA ABLOY foreshadowed the anticompetitive effects of the proposed merger in an internal communication, stating as a result of the transaction one of its residential door hardware brands would be “in a better pricing negotiation position and can expect to increase prices.”
The DOJ said the transaction would leave consumers in the U.S. with only two significant producers of residential door hardware and violates the Clayton Act in at least two distinct markets: premium mechanical door hardware and wirelessly connected smart locks.
Should the acquisition be consummated, the DOJ claims ASSA ABLOY would have a near-monopoly in the premium mechanical door hardware market “where the merged firm would account for around 65% of sales, becoming more than ten times larger than its next-largest competitor.” In the smart locks sector, the proposed merger “would cut off competition in a fast-growing door hardware segment, leaving the merged firm with more than a 50% share and only one remaining meaningful competitor —an effective duopoly,” the DOJ said.
ASSA ABLOY and Spectrum Brands each released statements on Thursday to convey they are confident in the merits of the transaction and will jointly defend it.
"We believe strongly in the acquisition of HHI as we together will increase investments in the residential segments and strengthen our combined product offering for the benefit of consumers," said Nico Delvaux, president and CEO of ASSA ABLOY.
ASSA ABLOY maintains the transaction will bring together its strength in access solutions and HHI's complementary specialization in residential products, which will be enhanced by ASSA ABLOY's culture of driving technology and innovation.
The Spectrum Brands statement said the DOJ’s lawsuit ignores the realities of the highly competitive residential security marketplace, “in which there are many capable and vigorous competitors and rapid, easy entry by new firms.” The combined entity will deliver more value and innovation to customers and enhance competition overall in an ever-changing marketplace, Spectrum Brands stated.
In July, ASSA ABLOY and Spectrum Brands agreed to extend their acquisition agreement to June 30, 2023, after the DOJ expressed regulatory concerns.
On Thursday, Spectrum Brands CEO David Maura said, “despite disagreeing strongly with the DOJ’s purported concerns, in the spirit of compromise — and to speed delivery of the concrete benefits this transaction offers all stakeholders — Spectrum Brands and ASSA ABLOY made numerous proposals to address the DOJ’s concerns, each of which were rejected without a valid basis. Their choice to pursue litigation places political ideology above the interests of American consumers and workers. We are confident that the Court will agree with us and will allow us to close the transaction.”
